Dana Gardner: Hello, and welcome to the next edition of the Voice of the Customer podcast series. I'm Dana Gardner, Principal Analyst at Interarbor Solutions,
your host and moderator for this ongoing discussion on IT
innovation and how it’s making an impact on people’s lives.

Gardner: Tell us about Playtika. I understand that you're part of Caesars Interactive Entertainment and that you have a number of online games. What are you all about?

Gudenkauf:
We have a few free-to-play social casino games. In fact, we're the
industry leader. We have maybe 10 games at this point. World Series of
Poker, which you've probably heard about, Slotomania, House of Fun,
Bingo Blitz, a number of studios combined.

Worldwide, we're about 1,000 employees. As I say,
we're the industry leader in this space at this moment. And it's a very
challenging space, as you might imagine, just within gaming itself. The
amount of data is huge, especially across all of these games. Collecting
information about how the users play the game and what they like about
the game, is really a completely data-driven experience.

If
we release a new feature, we get feedback. Of course, it’s social
gaming as well. If we find out that they don't like the feature, we have
to rev the game pretty quickly. It's not like the old days, where you
go away for a year or so, and come out with something that you hope
people like -- Halo, or something like that. It's more about the users
driving the experience and what they enjoy.

So we'll
try something with some content or something else and see if they like
this feature or functionality. If the data comes back immediately that,
as they do the slot spin and they have a new version of the game and
they're clearly not playing, we literally change the game.

In
fact, in the Bingo Blitz game, we will revise the game as often as once
a week, if you can imagine that. So we have to be pretty agile. The
data completely drives the user experience as well. Do they like this,
do they not like this, shall we make this game change?

Data-driven environment

It’s a complete data-driven environment. That's what brought me there. I came from Twitter, where we used very big data, as you might imagine, with Hewlett Packard Enterprise (HPE) Vertica and Hadoop
and such, but it was more about volume there. Here it’s about variety,
velocity, and changing game events across all of our studios.

You
can imagine the amount of data that we have to crunch through, do
analytics on, and then get user feedback. The whole intention is to get
feedback sooner so that we can change the game as rapidly as possible,
so that users are happy with the game.

So it’s
completely user-driven as far as kind of the experience and what they
enjoy, which is fun and makes it challenging as well.

Gardner:
So being a data scientist in this particular organization gives you a
pretty important place at a major table. It's not something to think
about at the end of the month when we run some reports. This is
essential and integral to the success of the company?

Gudenkauf: Of course, we do analyze the data for daily, monthly, and general key performance indicators (KPIs),
daily active users or monthly active users, those types of things. But
you're absolutely right. With the game events themselves, we need to
process the data as quickly as possible and do the analysis. So
analytics is a huge part of our processing.

With the user experience and what they enjoy and the free to play, in particular, the demand is pretty high.

We
actually have a game economy as well, which is kind of fascinating. If
you think of it in terms of the US economy, you can only have so much
money in the economy without having inflation and deflation. Imagine if I
won all the money and nobody else could have money to play with. It’s
kind of game over for us, because they can’t play the game anymore. So
we have to manage that quite well.

Of course, with the
user experience and what they enjoy and the free to play, in particular,
the demand is pretty high. It’s like with apps that you pay for. The
99-cent apps are the ones that people think the most about.

When
somebody is spending a dollar, it's very important to them. You want
the experience to be a great experience for them. So the data-driven
aspects of that and doing the analysis and analytics of it, and feeding
that back to the game is extremely important to us. The velocity and the
variety of games and different features that we have and processing
that as fast as possible is quite a challenge.

Gardner:
Now, games like poker, slots, or bingo, these are games that have been
around for decades, if not hundreds of years, and they've had a new life
online in the past 15 years, which is the Dark Ages of online gaming.
What's new and different about games now, even though the game is
essentially quite familiar to people? What's new and different about a
social casino game?

Social aspect

Gudenkauf:
I've thought about that quite a bit. A lot of it has to do with the
social aspect. Now, you can play bingo, not just with your friends at
the local club, but you can play with people around the world.

You
can share items and gifts, and if you are running low on money, maybe
you can borrow some from your friends. And you can chat with them. The
social aspect just opened up all kinds of avenues.

In
our case, with our games in the studios, because they're familiar, they
stand the test of time. Take something like a bingo or slots, as opposed
to some new game that people don't really understand. They may like it.
They may only like it for a while. It’s like playing Scrabble or
Monopoly with your family. It's a game that's just very familiar and
something you enjoy playing.

But, with the online and the social aspect of it, I explain it to other people as imagine Carmen Sandiego
meets bingo. You can have experiences where you're playing bingo, you
go on this journey to Egypt, and you're collecting items and exploring
Egypt, trying to get to another thing. We can take it to places that you
wouldn't normally take a traditional kind of board game and in a more
social aspect.

So you extract that data as usual and then you transform it. You
reshape it and change it around a little bit to put it in a format to
get it into a data warehouse like Vertica.

Gardner:
So this really appeals to what's conceived of as entertainment in
multiple ways for an individual. Again, as you established, the analysis
and feedback loops are really important.

I understand
why doing great data analysis is so important to this particular use
case. Tell us a little bit about how you pull that off. What sort of
data architecture do you have? What sort of requirements do you have?
What are the biggest problems you have to overcome to achieve your
goals?

Gudenkauf: If you think about the
traditional way of consuming data and getting it into a reporting
system, you have an extract. You're going to bring in data from
somewhere, and of course, in our case it’s from mobile devices, the web,
from playing on Facebook. You have information about how much money did
you spend, and user behavior. Did they like it?

So you
extract that data as usual, and then you transform it. You reshape it
and change it around a little bit to put it in a format to get it into a
data warehouse like Vertica.

A
new industry term that I'm coining is what we call Parallelized
Streaming Transformation Loader (PSTL) instead of ETL. This is about
ingesting data as fast as possible, processing it, and making analytics
available through the entire data pipeline, instead of just in the data
warehouse.

Real-time streaming

Imagine, instead of the extract, we're taking real-time streaming data. We're reading, in our case, off a Kafka queue. Kafka is very robust and has been used by LinkedIn and Twitter. So it’s pretty substantial and scalable.

We
read the messages in parallel as they're streaming in from all the game
studios, certain amounts of data here and there, depending on how much
we do with the particular studio. With Bingo Blitz, in our case, we
consume a lot more user behavior than say some of the other studios.

But
we ingest all the data. We need to get it in in real-time streaming. So
we read it in in parallel. That’s the parallel part and the streaming
part. But then we take it from the streaming, and instead of extracting,
it's being fed into us.

Then we do parallel transformations in Spark and our Hadoop cluster. Think of it as bringing in a bunch of JSON event data, we are putting it into an in-memory table that’s distributed in Spark.

Then,
we do parallel transformations, meaning we can restructure the data, we
can do transforms from uppercase, lowercase, whatever we need to do.
But it's done in parallel across the cluster as well. Where,
traditionally, there's a single monolithic app that was running, we
could run independent to the extract of the load.

We have so much data that we need to also do the transformations in parallel. We do that in what are called Resilient Distributed Datasets (RDDs).
It’s kind of a mouthful, but think of it as just a bunch of slices of
data across a bunch of computers and your nodes, and then doing
transforms on that in parallel. Then, something that has been a dream of
mine is how to get all that data in parallel at the same time into HPE
Vertica.

HPE Vertica does a great job of doing massive parallel processing (MPP)
and all that means is running the query and pulling data off of
different nodes in the cluster. Then, maybe you're grouping by this and
you are summing this and doing an average.

But, to date
they hadn't had something that I tried to do when I was at Twitter, but
managed to pull off now, which is to load the data in parallel. While
the data is in memory in Spark and distributed datasets, we use the
Vertica Hash function that will tell us exactly where the data will land
when we write it to a Vertica node.

We can say, User
A, if I were to write this to Vertica, I know that it’s going to go on
this machine. User B will go to the next machine. It just distributes
the load, but we, a priori, hash the data into buckets, so that
we know, when we actually write the data, that it goes to this node.
Then, Vertica doesn’t have to move it. Usually you write it to one node
and it says, "No, you really belong over here," and so it asks you to
move it and shuffle, like a traditional MapReduce.

Working with Vertica

So we created something in conjunction with the Vertica developers. We announced it. That part of it is kind of a TCP server
aspect that we extend in the Copy command that exist in Vertica itself.
We literally go from streaming in parallel, reading into in-memory data
structures, do the transformations, and then write it directly from
memory into our Vertica data warehouse.

That allows us
to get the data in as fast as possible from streaming right to the
right. We don’t have to hit a disk along the way and we can do analytics
in Vertica sooner. We can also do analytics in Hadoop clusters for
older data and do machine learning on that. We can do all kinds of
things based on historical user behavior.

If we're
doing a sale or something like that, how well is it resonating compared
to the past. What we're doing is pushing the envelope to push the
analytics as close as we can up to the actual game itself.

As
I said, traditionally, you do the analytics, get the feedback, change
the game, release it in a week, etc. We're going to try to push that all
the way up to be as near real time as we can. Basically, the PSTL
pipeline, allows us to do that, do analytics, and tighten that loop down
so that we can get the user behavior to the user as fast as possible.

Once you have it in as fast as you can, reshaping it while it’s in
memory, which of course is faster, and taking advantage of doing the
parallel transformations at the same time, and in the parallel loading
as well, it’s just a way more optimized solution.

Gardner:
It’s intriguing. It sounds as if you're able, with a common
architecture, to do multiple types of analysis readily but without
having to reshuffle the deck chairs each time. Is that fair?

Gudenkauf:
That's exactly right. That’s the beauty of this model and why I'm
putting up more prescriptive guidance around it. It changes the paradigm
of the traditional way of processing data.

We announced some benchmarking. Last year at the HPE Big Data Conference, Facebook stole the show with 36 terabytes
an hour on 270 machines. With our model, you could do it with about 80
machines. So it scales very well. Some people say, "We're not Twitter or
Facebook scale, but the speed at which we want to consume the data and
make it available for analytics is extremely important to us."

The
less busy the machines are, the more you can do with them. So does it
need to scale like that? No, we are not processing as much data, but the
volume, velocity, and variety is a big deal for us. We do need to
process the volume, and we do have a lot of events. The volume is not
insignificant. We're talking about billions of events, mind you. We're
not on the sheer scale of say Twitter or Facebook, but the solution will
work for both, in both scenarios.

Gardner: So,
Jack, with this capability analysis as close to real-time with the
volume and the variety that you are able to accomplish, while this is a
great opportunity for you to react in a gaming environment. you're also
pushing the envelope on what analysis and reaction can happen to almost
any human behaviors at scale. In this case, it happens to be gaming, but
there are probably other applications for this. Have you thought about
that or are there other places you can take it within an interactive
entertainment environment?

All kinds of solutions

Gudenkauf:
I can imagine all kinds of solutions for it. In fact, I've had a number
of people come up to me and say, "We're doing this Chicago Stock
Exchange, and we have a massive amount of streaming-in data. This is a
perfect solution for that."

I've had other people come
in to talk to me about other aspects and other games as well that are
not social casino genre, but they have the same problem. So it's the
traditional problem of how to ingest data, massage it, load it, and then
have analytics through that entire process. It’s applicable really in
any scenario. That’s one of the reasons I'm so excited about the PSTL
model, because it just scales extremely well along the way.

Gardner:
Let’s relate this back to this particular application, which is higher
entertaining games that react, and maybe even start pushing envelope
into anticipating what people will want in a game. What’s the next step
for making these types of games engaging? I'm even starting to toy with
the concept of artificial intelligence (AI),
where people wouldn’t know that it’s a game. They might not even know
the difference between the game and other social participants. Are we
getting anywhere close to that?

Looking at historical data and doing machine learning, we can make better determinations of games and game behavior.

Gudenkauf:
You're thinking extremely clearly on the spectrum in analytics in
general. Before, it was just general reporting in the feedback loop, but
you're absolutely right. As you can see, it’s enabled through our model
of prescriptive analytics. Looking at historical data and doing machine
learning, we can make better determinations of games and game behavior
that will drive the game based on historical knowledge or incoming data
that’s more predictive analytics.

Then, as you say,
maybe even into the future, beyond predictive and prescriptive
analytics, we can almost change as rapidly as possible. We know the user
behavior before the user knows the behavior. That will be a great
world, and I'm sure we would be extremely successful to get to that
final spectrum. But just doing the prescriptive analytics alone, so that
the user is happy with the game, and we can get that back to them as
quickly as possible, that’s big in and of itself.

Gardner: So maybe a new game some day will be pass the Turing Test, you against our analysis capabilities?

Gudenkauf:
Yeah, that would be pretty cool. Maybe eventually it will tie into the
whole virtual reality. It’s kind of happening based on the information
behaviors immediately. That will be neat.

Gardner:
Very exciting world coming our way, right? We're only scratching the
surface. I guess I have run out of questions because my mind is reeling
at some of these possibilities.

One last area though.
For a platform like HPE Vertica, what would you like to see them do
intrinsic to the product? We have the announcement recently about the
next version of Vertica, but what might be on your list, a wish-list if
you will, for what should be in the product to allow this sort of thing
to happen even more readily?

Influencing the product

Gudenkauf:
That’s one of the reasons we go to conferences. It’s one of the few
conferences where you can get to the actual developers or professional
services and influence the product itself.

One of the
reasons why I like to be on the leading edge or bleeding edge is so that
we can affect product development and what they are working on. I've
been fortunate enough to be able to work with developers and people
internal to HPE Vertica for quite a while now. I just love the product and I
want to see it be successful. With the adoption and their more openness
of working with open source like Spark and MapReduce, the whole
ecosystem works well together, as opposed to opposing each other, which I
think is what most people think. It’s a very collaborative, cooperative
environment especially through our pipeline.

I really
like the fact that when I talk about things like Kafka and the PSTL, and
that Spark is a core part of our architecture, now we're having
conversation, and lots of them, to help Vertica and influence them to
invest more in Spark and the interaction between Vertica data warehouse,
Spark, and that eco-system from Kafka.

One of the reasons why I like to be on the leading edge or bleeding edge
is so that we can affect product development and what they are working
on.

From the part of the work that we did with
Vertica over the last year with reading streaming data from Kafka into
Spark, of course, and then into Vertica, they said that reading
real-time streaming data from Kafka directly into HPE Vertica will be a
great add-on and they announced it. Ben Vandiver and developers
announced it.

I really want to be in a place, and this
affords us to be in that place, to influence where they are going,
because it benefits all of us and the entire community. It's being able
to give them prescriptive guidance as well from the customer
perspective, because this is what we're doing in the real world, of
course. They want to make us happy, and we will make them happy.

Our
investments have been in things like Kafka streaming and Spark and how
does Spark SQL work with Vertica and VSQL. They don’t necessarily have
to compete. There is a world for both. So coexisting, influencing that,
and having them be receptive to it is amazing. A lot of companies aren’t
very receptive to taking the feedback from us as consumers and baking
that into offerings.

One of the things in our model to
load the data as fast as possible in parallel is that we pre-hash the
data. If you just take user IDs, for instance, and you hash on those
IDs, so that you can put this user on this node, and this one on this
one and this one, is an even distribution of data, that wasn’t exposed
in Vertica. I've been asking for it since the Twitter days for years.

So
we wrote our own version of it. I managed to have the Vertica
developers, which is a rare and a great opportunity, review what we had
done. They said, "Yes, that’s spot on. That’s exactly the
implementation." I said, "You know what would be even better. I've been
asking for this for years and I know you have lots of other customers.
Why don’t you just make it available for everybody to use. Then, I don’t
have to use mine and everybody else can benefit from it as well.

They announced in 2015 that they're going to make it available. So being able
to influence things like that just helped the whole ecosystem.

Gardner:
Excellent. I'm afraid we'll have to leave it there. We've been
exploring how Playtika uses big data analytics deliver captivating
social game experiences and engagement for their end users, but we've
also seen that they have a tremendous amount of data science going on
and an architectural approach to conquer some of these hurdles around
volume, velocity, and variety that I think probably are applicable in
many other cutting-edge applications.

So a big thank to
our guest. We've been here with Jack Gudenkauf, Vice President of Big
Data at Playtika in Santa Monica, California. Thanks so much, Jack.

Gudenkauf: Thank you. It was a pleasure.

Gardner: And a big thank you to our audience as well for joining us for this big data innovation case study discussion.

I'm
Dana Gardner; Principal Analyst at Interarbor Solutions, your host for
this ongoing series of HPE-sponsored Voice of the Customer discussions. Thanks again for
listening, and come back next time.

Our next use case discussion focuses on an organization in Madrid, Spain called Mobile Experience. We're about to learn how they precisely track the location of individuals using mobile devices inside of large organizations, like a museum, and then apply that to an enriched mobile user experience.

To learn how precise positioning in a store or resort – anywhere with WiFi
– leads to fascinating new mobile business apps development and
interactive user experience benefits, please join me in welcoming Alvaro Garcia-Hoz, Founder and General Manager of Mobile Experience in Madrid. Welcome, Alvaro.

Gardner: Tell us about Mobile Experience and how you have been able to work with a Wi-Fi provider like HPE Aruba to provide this really unique and interesting location experience within a large building or campus.

Garcia Hoz:
We started working for museums and we saw that there were a lot of
mobile applications for museums -- but none of them were really helping
the visitors during their visits. So, we decided to make an application
for museumgoers, so visitors would have a much better experience.

We designed this application without thinking about
all the technology available at the moment. When we made the design, we
discovered that one feature that we needed was an indoor-location
system. So, we did deep research to try and find a way to have this
location capability work properly … and we found two suppliers.

The
first one had a Wi-Fi location system, and two years ago, when we
started working with them, we implemented their Wi-Fi indoor-location
system in the museum and it was working, but it was not working the way
we were expecting. The user experience was not good enough. But then, we
found HPE Aruba Beacons. They sent us a packet of beacons, and we deployed them in the museum.

We
quickly discovered that the system was working really, really well,
with very good accuracy. We made the deployment in less than a couple of
days across the whole museum -- that is about 150 beacons. It really
works, and the user experience changed totally.

Then,
we called HPE Aruba and we said, “Okay guys, come to the museum to see
how this is working because you're going to really be amazed.” And when
they came to the museum they said, “Wow.”

After the 18
months that we had been working together, we decided to make a
presentation for the media and other partners. From that moment on, we
began receiving requests for proposals for other industries like retail,
hospitality, and healthcare. There are hundreds of applications.

Gardner: How were the museums able to enhance the experience of their visitors through the technology?

Three points

Garcia-Hoz:
For me there are three very basic points. The first one is that they
can prepare guided tours for those visitors, depending on their specific
needs. Normally, when people visit a museum, after a couple of hours,
they're done and they leave the museum without knowing if they've viewed
all of the exhibits. They don’t know if they missed any pieces of art
or pieces of information that are important and relevant to them.

What
we give the museum is the ability to prepare those guided tours
depending on the amount of time a visitor wants to spend at the museum. So if you
go, for instance, to the British Museum,
given that we are in London, and you decide to spend two hours, the
application will show you the works that the museum thinks that you
cannot miss if you want to be there for two hours.

The
application will guide you through the museum like an indoor GPS, while
you're walking within the museum, and they will guide you through the 20
works you have to see in that museum, and then give you all the
information for those exhibits.

The
second point is that it's different information for different types of
visitors. For example, since we come from Madrid, when you are visiting
the Real Madrid Museum,
it’s different if you are 60 years old or if you are 20 years old,
because the information you want to see is very different. With this
application, we give the museum the opportunity to deliver highly
personalized information.

With this application, we give the museum the opportunity to deliver highly personalized information.

Gardner: Personalization is so important now that everyone is carrying a smartphone.
It really changes how you can have an experience within a shopping
mall, for example. Or, if you want to start providing commerce based on
demographic information, you could have something on sale for one person
but maybe not for another, because it wouldn't be appropriate for them.
In healthcare, if you're in a hospital, a large campus, it’s very easy to
get lost. There are lots of different ways that this can be used.

What
are the next steps? Where do you, Aruba, and HPE go in order to create a
developer following for more applications and more ability to take
advantage of this very precise location capability within almost any
building?

Garcia-Hoz: Aruba and HPE are helping
us a lot and they're spreading the word. This
technology is so new, and we're visiting very important customers. But
when we start talking to them, and we are talking about Aruba Beacons,
and how they can get all this information from users, we're exploring
what can be done and what can’t be done.

Gardner: Where can you go to get more information on this technology?

More information

Garcia-Hoz: You can go to my website, mobileXperience.es. There, we have a lot of information about different features that can be delivered for mobile users.

Gardner: And how about developers? Are they able to use the Aruba SDK or APIs? How would the developers start to take advantage of this as a service?

Garcia-Hoz:
There are two different ways of doing this. They can go directly to the
Aruba SDK to have that for them and build on that, and also they can
come to us -- if you already have your venue up you can use your API so
you can get all these features together.

We made the deployment in less than a couple of days across the whole
museum -- that is about 150 beacons. It really works, and the user
experience changed totally.

Gardner: We'll
have to leave it there. We have been learning about how internal use of
Wi-Fi networks with HPE Aruba Beacons allows for a whole new type of
user experience and personalization level in such venues as museums,
resorts, healthcare, and retail.

So a big thank you to
our guest, Alvaro Garcia-Hoz, Founder and General Director at Mobile
Experience, based in Madrid. Thank you so much, Alvaro.

Today, we present a sponsored podcast discussion on the impacts to the global storage market, now that the $67 billion Dell-EMC merger deal appears imminent. The proposed merger, which also includes EMC’s majority control of VMware, has been controversial from the start.

A massive and complex financing apparatus, largely built on private equity debt, undergirds the deal, with privately held Dell taking over the publicly traded EMC and VMware federation. This largest IT vendor deal ever is expected to close sometime between now and October 2016.

While EMC CEO and Chairman Joe Tucci
has assured the storage and IT infrastructure market that the mega deal
means business as usual, many observers, including analysts from Gartner, take a different view.

We're
now joined by two storage industry experts to explore how consumers of
storage infrastructure can best prepare for the expected storage
shockwaves from the Dell takeover of EMC and VMware.

To help us sort through the unknown unknowns of such an unprecedented business merger in IT, please join me in welcoming Jorge Maestre, Competitive Strategist, Global Storage at Hewlett Packard Enterprise (HPE). Welcome, Jorge.

Gardner:
Jorge, let’s start with you. Even before this Dell acquisition of EMC
was announced back in October, the storage market has been undergoing significant transformation. So, before we delve into the impacts of the
deal itself, let’s set some context here. What have been the major
trends impacting the global storage business, and why did they prompt
such an unprecedented merger in the first place?

Flash storage

Maestre: That’s a good question. Obviously, we start with flash storage. With flash as a focal point of primary storage in the data center,
the technologies have evolved. Well, in the case of flash, we're not
talking about an evolution; we're actually talking about a revolution.
It has completely trumped what you have with spinning-disk media
storage.

You saw a lot of different opportunities for a lot of
different vendors to jump in here and be the first with flash. EMC
didn’t have a head start technically. That hurts, when you have vendors
like Pure Storage, or ourselves at HPE obviously, or some of these other names like SolidFire and Kaminario.

And
as companies are consolidating their primary storage into these flash
footprints, which can be hyper-dense now, what we found is that other
[infrastructure] technologies have emerged. These technologies and these
trends have been here for a while, but now … they are very
complementary to primary storage. You now have use cases in your data
center where you can take advantage of things like hyper-converged or software-defined, or even just reinvest in file.

Now,
you're looking at a data center that needs to have a completed picture.
For all of EMC’s bravado, for all of their product set, for all of
their ability to sell, the completed picture from them isn’t something
that necessarily has always looked pretty.

We saw the result, which is the constant revenue decline.
I think they're in consecutive quarters of revenue decline, and in some
cases, they've taken a pretty bad hit. They've lost the midrange. The
number-one product in the midrange is the HPE 3PAR. They lost that segment, and that was their staple.

They've seen VMAX
revenue decline by almost 50 percent or more in the last few years, and
so it has painted this picture of this huge conglomerate, monolithic
company, maybe losing its way. The merger was at the right time.

Gardner:
So, we have technology changes. There are economics issues, but it’s
interesting, Craig, in the storage market there is more and more demand
for storage. People have more and more data in more and more formats and
they want to use it more strategically. How is it that we have, on one
hand, growth and demand for storage, but poor economic yields, as Jorge
has pointed out, from EMC’s traditional business?

Rice:
I disagree a little bit with Jorge. I think flash is a contributing
component here, but the catalyst that’s causing the greatest amount of
disruption is shareholder value. Let’s take a look at what’s transpired
over the past year.

We have an activist investor [Elliott Management] that’s been bullying EMC
for quite some time to divest themselves from VMware. VMware is a
catalyst that adds value to their storage array. We look at other
organizations such as NetApp and how they had to acquire SolidFire.

We have companies such as Pure, an upstart that’s done maybe $200 million in sales and an innovating leader.

When
you look at this, the whole challenge, the true disruption in storage,
in the IT market then stems from shareholder value. What uniqueness do
any of these mergers and acquisitions bring to the end-user customer?
How does a technology change, or an innovation of flash, drive value not
to IT, but to the lines of business? That’s what we've been seeing here
at Integris.

Business motivations

Gardner:
So clearly, there are business motivations from EMC and Dell that might
not necessarily be the same motivations that their
customers are facing, but this deal seems imminent. It seems like we
are going to go ahead with this unprecedented amount, largely funded
through private equity.

Joe Tucci tells everyone it’s business as usual, don’t be worried, but we saw in a recent research report from Gartner: Dell's Acquisition of EMC Will Impact Storage Customers,
10 March 2016, that this will impact customers of both vendors, no
question. They suggested it could take two or four years for the storage
market to settle out and for more clarity to come to that.

So,
what are some of the biggest risks, as you see it, Jorge, for the
storage architects and buyers at this time, with this deal in the works?

Maestre: I totally agree with Craig. He
brought up a good point about the financials, which I didn’t necessarily
dive into, and I think that if you take both of our points together,
you get the picture.

I don’t necessarily agree that
the storage market is going to be in some type of state of confusion.
EMC’s business customers, their business partners, might be in a state of confusion,
but I think storage is pretty solid in general. When you think about
the other vendors and what they're doing and what their numbers look
like -- whether it's technical value or financial value -- I think the
other storage vendors are there.

That said, to your
question, what we have to take a look at is what EMC is telling people
and what other people who are doing investigations on their own are
finding, and we're seeing that those data contradict one another.

What we have to take a look at is what EMC is telling people and what
other people who are doing investigations on their own are finding, and
we're seeing that those data contradict one another.

There
have been CRN articles, there have been Register articles that talk
about what EMC is telling everyone, "This is going to be great. This is
going to go well. The two companies combine. They're going to be $80
billion. We're $80 billion with a revenue, blah, blah, blah, blah." The
reality is that’s not going to be the case. Both companies are seeing
revenues continue to decline.

As they merge, probably
there's not going to be any overlap. Just take a look at the storage
portfolio. You're not going to see a lot of overlap there. EMC is going
to announce a new product [in May 2016] that everyone is expecting to
jump into that entry-level space. So, they're probably going to even
create a displacement for Dell Compellent.

And,
of course, Dell is telling people, "No matter what happens, we'll still
support Compellent for five years." That’s pretty much saying, "This
product is dead." Most people agree that that’s going to happen.

From
a product set perspective you're not going to see too much craziness.
You're going to have the same EMC salespeople selling the same stuff.
They're going to be selling servers too now, which could be a good thing
or a bad thing, depending on where you come from.

But
what we're not seeing, and what we're not going to see, is any type of
growth. There is no way there's going to be any growth. They're talking
about cutting $2 billion worth of expenses just to pay for this $67
billion deal. That’s a huge number. Cutting your expenses that much in
order to show an increase in revenue, assuming you don’t lose any
customers, or lose any executives, as this merger becomes complete, is
just a huge risk.

Not going to happen

It’s not even a risk; it’s an uncertainty. There's no way it’s going to happen. I think there is a CRN article
that talks about this. In order for them to actually show revenue
growth, they have to see a seven percent improvement on top of the $74
billion that would combine the two companies together. That’s where they
would be today.

That’s crazy -- seven percent on top
of that and from two companies whose revenues continue to decline? How
is this merger all of a sudden going to stop the revenue decline, turn
it around, and bring it up seven percent? We could talk about financials
all day, but you have to have a compelling product set for that. They
don’t have it. I just don’t see it.

Rice: Dana,
I'd like to emphasize one thing that Jorge said. I have some unique
insight. We are a partner that used to be exclusively EMC. We've seen
the writing on the wall. We've been working with HPE and transitioning
over. We have a lot of good friends that have worked at EMC for 10, 12,
15 years, and in that highly competitive sales force environment of EMC,
that’s a lifetime. These key leadership positions from district
managers, area managers, and engineers are leaving the company in
droves.

Why are they leaving
if this is such a good deal and things are going forward? I have
customers asking, "What happened to Bob Smith? He has been our rep or
our district manager for 10, 12 years, why did he leave and go there?" I
think that just puts credence on Jorge.

Gardner:
We certainly have very big and different cultures here, where EMC has
always been focused on enterprise, large companies, with an aggressive
sales force, a very involved sales force. Dell, on the other hand,
focused more on the mid-tier, and largely a self-service culture, where
people are encouraged to buy things at a commodity level.

So
what does that mean for enterprises? Are they going to see the Dell
culture come to the EMC market or will the EMC market go to the Dell
tier? How do you see these cultures melding, particularly in sales, that
inflection point between the customer and the vendor? Jorge?

Maestre:
Here’s the thing. This gets a little frustrating because we're dealing
with the greatest sales spin marketing company of all time. EMC is the Michael Jordan
of sales spin, marketing, and everything else. Maybe not so much in
product delivery and all that other stuff, but the reality is that these
guys know how to talk the game.

This gets a little frustrating because we're dealing with the greatest sales spin marketing company of all time. EMC is the Michael Jordan of sales spin, marketing, and everything else.

It’s like everyone went to the Don King
school of selling. They can just promote, promote, promote all day.
They do a good job of being Don King-like, every single one of them. For
those who don’t remember, Don King was a huge boxing promoter in the
‘80s; Google him.

So,
they are all that and they are good at that. For me, it’s very
frustrating, because there is nothing there. We take a look at the
revenues, the product sets, and there's just nothing here. You're
looking at two completely different product sets. There's nothing
compelling about it.

Now take that a step further. Why
are people so interested in this? Why is everyone in love with this
merger? The reality is because people love EMC. It’s the badge, it’s the
sales badge, it’s the resources, and it’s the fact that they make you
feel good. They come to your house. They make you hot cocoa. They tuck
you in at night. That’s what they do. That’s how you sell. They're great
at it. Nobody does it better than them. They literally set a bar of
selling that no other vendor has even attempted to approach. You have to
tip your hat.

Gardner: How will that change, Jorge?

It takes resources

Maestre:
Well, that’s just it. It takes resources. That’s the point. That takes
resources. You have to invest in that. You have to put a lot of money
behind that. You have to create a huge support infrastructure. Take a
look at how each company invests in their R and D, just to put it in
perspective. Dell’s numbers, public numbers are somewhere in the area
of 10 percent. EMC’s numbers are somewhere in the area of 25 percent; it
might be a little bit more than that.

Think about
their resources. EMC is a resource-heavy company. Dell is a very lean
company. They're very much an assembly-line company. Let’s push it out
here, and we'll make our revenue through volume, and don’t worry about
the margins. That’s what they've shown. It’s almost contradictory
cultures, contradictory selling styles, and now you have to put them
together.

There's an ESG
report that targets EMC customers and asks how they feel about this?
Seventy five percent of the people who responded to that said, "We're
fine; nothing is going to change." That’s crazy.

There's no way Dell just raised $45 billion. It’s not like they went to
the bank and asked for a $45 billion mortgage. They actually raised $45
billion in private equity.

If you go to their
target customer base, the people who are EMC loyals, what do you expect
them to say? That’s like going to a kid and asking him if he is unhappy
about his parents. Of course you're going to get comfort level. The kid
is going to say, “Yes, I love my parents, what are you talking about?”
It’s the same thing.

That’s what ESG did and they published this report. What it’s actually telling you is that 25 percent of those people are concerned. Twenty five percent is a big number for people who are EMC loyals. That’s a huge number, and we have to consider that.

At
the end of the day, when this is all completed, those 25 percent are
right to be nervous about this. There's no way Dell just raised $45
billion. It’s not like they went to the bank and asked for a $45 billion
mortgage. They actually raised $45 billion in private equity.

That
means they don’t even get to say how the money gets spent. I'm sure
they had to show game plans and show how these are going to work to get
the money. So, of course they had a plan. And of course the private
equity investors were no problem. They bought into the plan when they
gave the money, but they still have to have return on that.

And
that means you're not going to be resource-heavy the way EMC is today.
You're not going to invest in your business the way EMC does today. You
have no choice; you have to recoup it. So if we see the data, it’s
already there. Dell has told people they have to cut expenses by $2
billion a year. How can you be resource-rich, resource-heavy, the way
EMC is today and cut $2 billion in expenses? You just can’t. You can’t
have it both ways. It’s one or the other; there's no way around this.
There are a lot of EMC customers out there who are due for a major
wake-up call.

Gardner: Craig, Jorge said the
halcyon days of EMC sales is coming to an end, that they won’t be
spending the money to have that sales force. Is that what you're seeing,
and what’s wrong with going to the Dell model of a straightforward
information-based, order-it-online approach to storage?

Assembly-line model

Rice:
We're seeing that. Like I mentioned earlier, Dana, there are a lot of
people who have been long-term tenured, the soul of EMC, and they're
leaving the organization. There's nothing wrong with going to the
streamlined assembly-line model. I hope they do it and I hope they do it
successfully, because what that means for a partner like myself that's
focusing on HPE is that they're taking value out of the equation.

Their
buyers are going to come to Dell-EMC and they're going to buy solely on
price. Going to Jorge’s point, in raising $45 billion in private
equity, you have to do an awful lot of volume to pay back those types of
people.

When you start to add value and you understand
the customers’ business like we do and other HPE partners do, because
of the portfolio which HPE has, it’s going to become a very clear
night-and-day difference of who is going to be able to provide a
business the ability and technology in the partnership to grow from 10
percent of their market share to 20 percent to 30 percent. I don’t know
many businesses that just want the low price and don’t want value and
don’t want a partner to help them grow their business. The Dell-EMC
model is not that.

Gardner: Doesn’t this come at
an interesting time as people are looking at storage more through a
hybrid, where they're using flash, they're using different arrays,
they're investing in SAN,
there’s this ability to do more with storage across more transformation
areas of their business -- but at the same time, we're expecting Dell
to go more to a commodity’s approach. Isn’t that contradictory to where
the market is headed, where you need to do more intelligent, thoughtful,
strategic approaches to storage? And Craig, correct me if I am wrong,
but it seems that Dell is taking a risk by not having a more
sophisticated approach to sales if that’s what they need to do.

They're not just taking a risk. They're betting the whole company. They're putting everything in on black.

Rice:
Oh, 100 percent. They're not just taking a risk. They're betting the
whole company. They're putting everything in on black. That would be
concerning to me if I were a customer looking at that. They're going to
be so debt heavy, so focused on storage without innovation on compute.
Storage is just not alone; you have all these applications, all these
business processes that need to rely on compute.

What
type of innovation are they going to do? Let’s make that even a little
bit cloudier. You're not going to do any innovation, but yet you sell a
lot of servers because you're a volume-based business, but yet I have a
partnership with a competitor. So I have competition with Cisco that's also self-compute.

Now, how can the two of you offer something you need, how can they bring out a product like Apollo or Moonshot? You need to do more than just innovate on storage; you need to innovate across whole IT spectrum.

I
don’t see them doing that because they're going to be so debt-heavy, so
laden, that they have to trim all these costs and expenses, and by the
way, they have to do an awful lot of volume. If you're doing volume, you
can make the best little widget, whatever that widget is, but how do
you bring out that next product line, how do you impact the market, how
do you change the industry, how do you bring out something like what HPE
is doing with composable infrastructure? Where is that innovation in
the Dell model?

Gardner: Clearly, this is not
business as usual in the new sales force. So how can organizations that
might be heavily EMC-orientated, or for smaller-sized organizations that
are using a lot of Dell, protect themselves? They can hope for the
best, they can hope that things don’t change for them, but what
assurance can you put in place so that no matter what happens with Dell
and EMC, you can, as an enterprise, still continue to do your business
as usual?

Stay or move

Maestre:
That’s a good question. For the Dell customers, the product set is easy
to stay in or move to something else. If you choose to stay with the
new Dell-EMC, there are a million ways to graduate from Dell into EMC’s
portfolio, and of course, there are a million ways to get off of Dell’s
portfolio easily altogether. So those customers are relatively safe. I
think it’s relatively low risk.

The challenge … is not
going to be technical, but it’s certainly going to be relationship-wise,
and I don’t mean to disparage Dell. If it comes across disparaging, let
me apologize up front for it, but Dell isn’t necessarily known for
being a relationship company. I don’t know that relationships are all
that important, but you may have business processes in place, you may
have contracts in place, things like you get in things at a certain
dollar-per-gig or at a certain price point. There is some risk to that,
but that happens in business every day anyway. So, very little risk.

Let’s
flip it over to the harder question, which are EMC shops. Forget that I
work for HPE or anybody else. EMC products may work, but there's no
question that it takes a lot longer to get those things set up and in
place than other vendors’ products.

So, you’ve now not
just made a financial investment but you have a significant time
investment, a significant training investment. That’s a lot trickier. If
you're not happy with this new combined Dell-EMC entity, if you're not
happy with the direction, if you're not happy with the products that you
are going to get going forward, you have a long road ahead of you.
You're going to have to talk to some vendors and you're going to have to
figure out how to migrate off. You have to figure out what your
direction is. I would give those customers the same advice I give any
customer.

What’s
your plan? What does your world look like in three years, in two years,
in one year, whatever it is? Tell me what Utopia looks like, give me
that, and then we'll figure out how to make the technology fit that. I
don’t think those customers should be making concessions for the
technology or the technology vendor or the technology vendor story. They
should be making those vendors either deliver, or move on to a vendor
who can. Those are the conversations they have to start having.

In
a way, this is an opportunity. EMC customers who invested in a lot of
infrastructure can now look around and say, "Maybe this is an
opportunity for me to shrink my infrastructure, to take advantage of the
fact that it’s a buyer’s market in storage, take advantage of flash,
take advantage of all these different things, and see what I can do to
restart my infrastructure and get me closer to what my dream vision of
my data center would look like."

It could be a long and
winding road. You may want partner companies. Partners are critical.
The one thing that everyone has in common is Dell. HPE, IBM, no matter
who you're talking to, they're all talking about partners and how
important partners are. This is the best time in the world to lean on
those partners and say, "Guys, help me navigate through this."

The
challenge is finding an impartial or unbiased partner. Everybody works
with one specific vendor, and in that way, they're just an expansion of
the vendor, but there are a lot of good ones out there. This is the best
time to lean on those guys if for nothing else, then just to get their
consultative advice.

Gardner: Craig, anything to offer on that?

Great for partners

Rice:
Jorge put it very eloquently. This is great for partners. This is where
we can add the value on behalf of OEMs and ourselves. And to Jorge’s
point, we do that for our customers. Two years ago, we were exclusively
EMC. We made a business decision to transition.

We
have relationships with our partners such that we just can’t leave them
high and dry. So, what we're advising them is what we call our "sneak
peek assessment." Let’s take a look at what your business needs are
going to be over the next two to three years. We want to establish a
five-year roadmap, and then let’s do something very simple. Let’s go on
an Executive Briefing Center visit with Dell and EMC and see what the
roadmap is.

In the same regard, we need to look at your
business, because our first concern isn’t the OEM. Sorry guys, but it’s
that relationship, that personal and business relationship that we, the
partner, have with the customer. Then, we'll also say, "Let’s look at
who else can offer that. Let’s look at HPE, and let’s see how their
technology and product offerings, along with our services, best helps
that customer and their business needs grow year after year." That
unbiased advice, those business and tactical decisions, are the key for
any customer that has concerns about this.

Let’s look
at it differently. Dell and EMC are going to do a great job with this
merger and acquisition. The question is, at the end of this, will they
be able to provide significant enough value to their customers for their
customers to wait. Those customers need to ask, "Can I put my business
on pause, can I put it on hold, for the next two to three years, while
these two companies work through all that?"

Social media has created an endless stream of data that’s going to be
written all the time. IoT exacerbates that. Change is always going to
be here.

Look at some of the recent acquisitions or spin-offs that Dell has done. They just spun off their Perot Systems. They were anticipating getting $5 billion for it, but they sold it off to NTT
for $3 billion, that’s 30 percent less. If that’s a precursor of what’s
to come then a business has to think, "Can I afford to wait?"

Gardner:
What's the time frame here, Jorge? Craig mentioned two or three years
for Dell and EMC to provide a unified pipeline and roadmap for strategic
planning and thinking. Are there vendors like HPE who can offer them
that vision now? Is the next two to three years that important in
business and IT transformation?

It seems to me that
we're at a point where business agility means getting new systems in
place to accommodate things like user experience, the expectations, big
data, and Internet of Things (IoT).
These are driving change very rapidly. Waiting two or three years
seems to me a very long time for making strategic decisions.

Maestre:
Let’s put that in perspective. The only concept in this industry is
change. Things are always going to get better. Social media has created
an endless stream of data that’s going to be written all the time. IoT
exacerbates that. Change is always going to be here.

Every
vendor is always going to be changing in some way, shape, or form,
always going to be evolving. They have to. Otherwise, they're going to
be left behind. Craig brought up a good point earlier about NetApp and
what happened at NetApp. Now, they are buying SolidFire, and that’s like
their fifth or sixth different attempt at getting into the flash
market.

So, you're certainly looking at a world where
you can't be just constant. Either you stay in front of it or you're
going to get left behind. The issue for EMC customers for the next two
or three years is not so much the roadmap, the combined product set.
Everybody agrees that there is very little overlap. No one wants to
disrespect Dell here, but the reality is that there is very little in
the storage world that Dell has that isn’t going to be replaced by EMC,
and EMC doesn’t sell servers.

Real questions

Sure, there are some questions around VCE and Vblock, but is that going to be their investment? Why would you continue to partner with Cisco Unified Computing System (UCS) when you have servers already? Those are real questions, and that’s probably one of the points that Craig made so well before.

But
the reality is that that’s not where you are going to feel the pain in
the next two or three years. Where you're going to feel the pain over
the next two or three years is in that thing that made EMC special, the
fact that they make you feel good about your purchase and the fact that
they support you, and they deliver what they say.

Here’s
the thing that no one ever thinks about with EMC. EMC walks in there
and asks you, what’s your application, what do you need, what are you
looking for, and how do we solve it? They bring you 50 billion experts
who come in and talk about your needs and tell you that they're going to
give you a solution that solves that problem. Everybody got EMC because
they gave you that good feeling.

No one ever stops to
consider the fact that other vendors could do the same thing in about
10,000 fewer steps. EMC gives you what they said they were going to give
you and they deliver. There's no question about it, but all the steps
that go into that, that’s where you're going to feel the pain. For the
next two or three years, you have to combine support companies, and
that’s a problem. You have to change your business model, which is going
to impact the support companies, and that’s a problem.

Even if everything worked out in the way that Joe Tucci said it would,
there would still be a lot of change, there would still have to be some
concessions.

Your service is based on the people
who are going to leave, the point that Craig made earlier, but not just
the people who are going to leave, but what process is going to survive.
You have to be a blind fool to go into this thinking that nothing is
going to change; that’s ridiculous. Of course, something is going to
change. Even if everything worked out in the way that Joe Tucci said it
would, there would still be a lot of change, there would still have to
be some concessions. So there is no question about that things are going
to change.

So the one thing that made EMC great, in
making all of those steps to give you what they promised, feels painless
and makes you feel good. All of that is where you're going to feel the
pain for the next two or three years. Craig nailed it. It’s going to
take about two or three years for them to sort all that out. That’s
where the problem lies and that’s where this is going to impact
customers. That’s why now is a good time to maybe start thinking about
going elsewhere or looking at other direction.

Gardner:
We're coming up toward the end of our time. Let’s get a couple of
concrete, practical recommendations in place. If you want to hit your
best, if you want to diversify, you had some unknown unknowns about Dell
and EMC, even if things go 100 percent on track as they profess, it’s
going to roil your organization to some degree. How do you get assurance
of reducing your risk as a consumer of storage? Let’s start with you,
Craig.

Rice: The best thing there is to make
competition a key component. I've read a couple of reviews from a couple
well-known organizations that say get it in writing. I worked at EMC
for a while, I worked at HPE for a while over the past decade. Prior to
this change, a lot of salespeople would always do that get-it-in-writing
thing. “Mr. Customer, I guarantee this.” When they leave, what good is
that guarantee? They're a publicly traded company. You can’t commit that
in writing. Will Dell and EMC do that going forward? I don’t know.

The
best way to keep them honest is to find a partner, such as Integris --
there are many other good partners as well. Evaluate some competing
technologies. Competition will always keep each other honest. That’s the
simplest, most efficient, and least impactful way that a prospective
customer can determine it. Do I want to go with Dell-EMC? Do I want to
go with HPE? Do I want to go with anyone else? Bring competition in with
a partner so they can equally evaluate what they had to offer.

Gardner: Jorge, last word, your recommendations on how to reduce your risk as a consumer of storage for the next several years.

Reducing risk

Maestre: The best way is to buy HPE; no more risk. That’s what HPE stands for, Helping People Everywhere.

Aside
from that, the best way to reduce your risk is simple. Craig just made a
huge point. Find partners you can work with that are good. Integris is a
good one, and there are others, but find partners who are out there who
can take care of you and have your best interests at heart, whose
interests aren’t aligned with another vendor’s interests.

It’s
great that they resell a vendor’s product, but the best partners have
expertise across multiple vendors, and that’s what you want to look for.
That’s important.

The other thing is to have a plan,
make a plan. One thing I know about HPE in terms of the enterprise is
that we absolutely make the best product. I don’t have to give you a
commercial to buy my stuff. I know that we have the best product, and
you'll wind up here eventually.

Consider your perfect
data center, think it through, write it down, and then start talking to
people, and the people who can fit your vision those are the guys you
want to talk to. Don’t worry about what somebody else is saying, what somebody else is marketing, what somebody else is highlighting.
The people who ask you to make concessions to fit their product set are
probably the guys you want to walk away from. That’s the best way to
reduce risk -- just essentially invest in yourself.

Gardner:
I'm afraid we'll have to leave it there. We've been discussing the
impacts to the global storage market now that the $67 billion Dell-EMC
merger deal appears imminent. And we've seen how the mega-deal means
that in the next few years, almost certainly, will not be business as
usual for EMC and Dell users, and that they're going to have to make
some adjustments -- or at least anticipate a different culture -- across
their storage and IT infrastructure markets.

And a big thank
you as well to our audience for joining us for this Hewlett Packard
Enterprise-sponsored Storage Market Transformation discussion. I'm
Dana Gardner, Principal Analyst at Interarbor Solutions, your host for
this ongoing series of business transformation discussions. Thanks again for listening, and do
come back next time.

Transcript
of a discussion on the customer impact from the expected merger of two
IT industry giants with very different corporate cultures. Copyright
Interarbor Solutions, LLC, 2005-2016. All rights reserved.